The Least You Need to Know About Retirement
Retirement. Young workers, does the word make you nervous? Make your eyes glaze over? Or both? Never fear, by the end of this column you will have a plan in place.
Surveys show that workers under 35 understand the reality that they'll be responsible for the majority of their own retirement income through savings and investments. Unfortunately, they're not putting their money where their mouths are. Only 28 percent of young workers participate in employer-sponsored retirement plans when offered -- the lowest participation rates of any age group.
According to the
Young people tend to give four reasons for putting off retirement planning: It seems too far away. They have other financial obligations, like debt. Their earnings are too low to save "enough," so why bother? And, finally, it's too complicated. Here's how to banish all four objections.
1) It's too far away.
Money that you put away in your 20s has 10 more years to grow through compound interest. The difference is dramatic. Compounding means a single
2) I'm paying off student loans.
It's true that if you have student loan debt, you should continue to pay it down on time. But that obligation must be balanced with the obligation to start saving for retirement as soon as you start working (see No. 1).
3) I can't save "enough."
Maybe you can't spare the maximum annual 401(k) contribution of
4) It's too complicated.
It's actually quite simple. Email your company's HR director and tell him or her you want to open a 401(k). If you don't have a 401(k), or a job, pick a brokerage such as Vanguard or Fidelity and tell them you want to open a Roth IRA (best for people in their 20s). You can do this online or over the phone. You can set up automatic monthly contributions of as little as
An index fund gives you broader exposure to the entire stock market, unlike traditional mutual funds. And fees for these funds are less than 1 percent, which should be your target, because fees make a huge dent in your returns over time.
Worry about diversification later -- today, the goal is to get started, and
Available at Amazon.com:
- The Magic Numbers of Retirement Planning
- Can I Afford a Baby?
- 6 Ways to Cash In On the New Health-Care Reform Law
- The Least You Need to Know About Retirement
- Tax Changes for Health Insurance Buyers, Home Buyers and the Unemployed
- Small Changes to Get out of Debt and Save Money
- Is Your 401k Riskier Than You Think?
- 10 Places to Go Carless in Retirement
- Deducting Medical Expenses
- Public Support For Government Workers a Case of Pension Envy
- How to Spring Clean Your Personal Finances
- How to Save for Retirement Without a 401k
- What You Really Pay for at the Pump
- Converting Regular IRA to Roth: A Good Idea?
- Retirement Savers Need to Plan for the Critical Draw-Down Phase
- 9 Secrets of Retirement Happiness
- 401k Mistakes Job Hoppers Make
- Why Gen-Y Might Be Too Frugal
- How to Profit from your Hobbies and Interests
- Websites Make it Easy and Even Fun To Reach Savings Goals
- How to Evaluate College Financial Aid Options
- Find This Year's Investing Strategy in Last Year's Tax Return
- Tips for Filing Your 2010 Income Tax Return
- Bad with Money? Blame Your Parents
- The Financial Planner Relationship is a Fragile One
- 7 Reasons Why You Don't Have a Pension
- Tax Mistakes Parents Often Make
- SEC Takes Steps Toward Financial Planning Overhaul, But Issues Remain
- 5 Smart Ways to Save Money for Your Children
- Financial Advisers: Prepare for Big Tax Hikes in 2012
- How to Tweet Your Way to Retirement Goals
- The New 401k Plan: Not Just for Retirement Anymore
- How to Shop Around for the Credit Card That Suits You
- A Better Use for Your Tax Refund
- 5 Failures of Financial Planning and How to Fix Them
- Social Security Changes Coming in 2011
- Don't Let Your Kids Ruin Your Retirement Fund
- Consumer-Protection Law Steps in Where Responsible Merchants Do Not
- Young People Should Go Slow in Taking on Credit Cards
- New Website Streamlines College-Aid Application
- Retirement Saver's Credit Could Significantly Reduce Tax Bill
- Gift-card Resale Market Thrives Online
- Spend Your Money on Happiness
- The Smart Way to Pay Kids an Allowance
- Why Lump Sum Pension Payments Are Bad Deal for Most Retirees
- Sudden Money: Six Steps for Handling a Windfall
- One Key to Secure Retirement: Consistent and Prudent Behaviors
- Why Most New Year's Resolutions Are Guaranteed to Fail
- Money Manager Thinks Rising Interest Rates Will Bail Out Retirees
- Get Your Financial House in Order One Month at a Time - Part 2
- The 411 on Credit Card Offers
- 50 Ways to Improve Your Finances in 2011
- Avoid These Common Personal Finance Mistakes
- Young Adults Set Big Money Goals for 2011
- New Year's Resolutions for Personal Finances
- As Boomers Start Turning 65, the Big Question is, 'What's Next?'
- 7 Tips for Baby Boomers Turning 65 in 2011
- Get Your Financial House in Order One Month at a Time
- More Often Than Not, Debt Consolidators Just Make Financial Problems Worse
- What Older Americans Stand to Lose if Health Reform Goes Down
- When Debt Collectors Go After the Wrong Person
- For Help With Medical Bills Cut a Deal With the Doctor
- The Baby Boomers Turn 65
- AmEx Platinum: Expensive but Some Good New Extras
Personal Finance - The Least You Need to Know About Retirement
(c) 2011 ANYA KAMENETZ. DISTRIBUTED BY TRIBUNE MEDIA SERVICES, INC.